Small-cap stocks are trading at low valuations compared to large-cap S&P 500 stocks. With the chances of recession lowering, this could be a good time to load up on ‘riskier’ plays.
Archer Aviation (NYSE: ACHR)
Archer Aviation is an aerospace company that designs and develops electric vertical takeoff vehicles (eVTOL). Its aircraft is designed for urban air mobility, such as airport-to-city transfer.
Currently, the company is working on an eVTOL aircraft called ‘Midnight’, designed to fly up to 100 miles but optimized to conduct back-to-back flights of around 20 miles with 12 minutes of charge time in between. Archer aims to get to a flight cost that will be competitive with a ground-based ride.
Production and commercial services are planned for 2025, while the company may deliver the first Midnight aircraft to the Department of Defense later this year.
Archer has already raised $215 million in investments from companies like Stellantis, United Airlines, and the investment firm ARK Invest.
In its Q2 earnings report, Archer reported a cash balance of $408 million, which should be enough to deliver the Midnight on schedule.
Morningstar’s quantitative equity report gives ACHR a fair value of $9.79, 41% above the current price of $6.93.
SoFi Technologies (NASDAQ: SOFI)
SoFi provides financial services where users can lend, borrow, spend, or invest their money. The company operates through three segments: lending, technology platform, and financial services. Its popular products include SoFi Invest and SoFi Checking and Savings. SoFi also provides a credit card with cashback rewards.
Its Q2 report beat revenue estimates. Anthony Noto, CEO of SoFi, said in the earnings call, “We delivered another quarter of record financial results and generated our ninth consecutive quarter of record adjusted net revenue, which was up 37% year-over-year.”
The company saw user growth by 44% to 6.2 million at the end of the quarter, and it added $2.7 billion in deposits, bringing its total to $12.7 billion. This is huge since it provides SoFi with a cheaper funding source for its lending segment.
Morningstar’s analyst equity report gives a fair value of $14.50 per share, which is 65% higher than the current market price of $8.74.
Archer and SoFi have outperformed the S&P 500’s 18% return year-to-date. Archer saw a massive 259% return, while SoFi returned 94% to investors during the same period.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
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